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Announcing our first Series B – We’re going all in on SmartHR

We’re excited to announce that our portfolio company, SmartHR, just closed their JPY 1.5 billion (~$13.3m) Series B. We both led and exclusively invested the entire round*.

If you work in the tech industry in Japan, it is very likely that you’ve heard of SmartHR. They provide cloud-based software to help manage the cumbersome back-and-forth of obtaining and sharing personal information from employees. In the U.S., you can compare them to Gusto, Namely, or Zenefits. Surprisingly, even in 2018, most companies in Japan still do this on paper forms and manage employee data in Excel (if your company still does this, talk to your HR department about SmartHR now!).

Miyata-san, Naito-san, and their team found a pain point that everyone understands and built a solution that is so easy to use that it sells itself. They’re growing at about 16% a month and serve Mercari, Bears, Crowdworks, and many more happy customers.

Although we are primarily a seed stage investor, companies like SmartHR don’t come around very often. Therefore, we made an exception and put together a target fund to invest exclusively in SmartHR’s Series B. In the US, they call this a “Special Purpose Vehicle,” or SPV.

This arrangement is ideal for founders for several reasons. First of all, when you need to raise a round of this size there are very limited options in Japan. What sometimes happens is that you get a large “party round,” where a number of investors put in $1-2m checks and then you end up with a crowded cap table. The investor base at this stage also tends to have much more demanding reporting requirements.

The combination of these two factors means that you start spending much more time communicating with investors rather than focusing on your business. With an SPV, you can rely on one investor to consolidate the investor base into one line on your cap table. You technically have more than one investor, but you only need to directly deal with one that you trust.

The other benefit is that Miyata-san essentially outsourced his fundraising process. We went out and raised the money for them within about 1.5 months and only took about 10 hours of his time. This is unheard of for any founder in Japan.

We did all this because we have absolute conviction about this company. There may be clones going forward, but no one can replicate the amazing culture that Miyata-san and Naito-san has built. We believe that they will continue to attract the best talent and innovate far faster than any competition.

With that said, we are honored that Miyata-san chose us to lead their Series B. We can’t thank them enough for this incredible opportunity, and we’ll continue to support them with all our might!

P.S. As a firm, we will continue to drive new initiatives to help founders in Japan. Whether it is importing Silicon Valley concepts like the J-KISS or our recent SPV, or providing knowledge and transparency through our blog and events, our hope is to grow the ecosystem as a whole. We don’t need to take a big piece of the pie. We want to make the pie bigger for everyone, so that Japan’s startups can be finally be recognized on a global level.

*This vehicle was raised as a part of the 500 Global family of funds

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Founding Partner & CEO @ Coral Capital

James Riney

Founding Partner & CEO @ Coral Capital

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